US Retail Sales Drop 0.2%

14 June 2012 08:00am - Florence Fullalove

US Retail Sales Drop 0.2%

The Commerce Department has said US retail sales fell further in April and May, because of a sharp drop in gas prices and cautious consumer spending. Retail sales dipped 0.2% last month, following a revised 0.2% decline in April. The back to back declines were the first in two years.  The weakened reflected a 2.2% fall in gas station sales. However, excluding these sales, retail spending rose just 0.1% in May and it dropped 0.1% in April. This is a sign that slower job growth and low wage increases may be leading consumers to cut back on spending. Americans did though spend more in May on bigger purchases as sales of cars, furniture and appliance all increased which is perhaps a sign that consumers are gaining more confidence in the economy. Furthermore, lower gas prices could give consumers more to spend in the coming months on purchases that drive growth.

Retail sales are closely watched as consumer spending accounts for nearly 70% of economic activity in the US.  Julia Coronado, chief economic for North America at BNP Paribas said, "There is clearly some slowing in the pace of consumer spending broadly suggesting noticeably slower growth in consumption in the second quarter." Last month, gross domestic product figures showed that the US economy grew at an annualised pace of 1.9% in the first quarter of this year, down from an initial estimate of 2.2%. The slower growth rate followed a modest downward revision in consumer spending.